UBS S.A.

Investment Funds Glossary

Affidavit		See bank declaration.
All-in fee		UBS charges an all-in fee on most of its securities and money market funds. This fee is charged to the fund’s assets and covers all costs incurred in connection with the fund’s management and administration of the fund assets. This includes all expenses incurred for the purchase, sale and safekeeping of securities, plus all other related expenses (printing prospectuses, annual and semi-annual reports, costs for auditing and publication of prices, fees charged by the supervisory authority, etc.). In the case of investment funds domiciled in Switzerland, the all-in fee does not include Swiss stamp duties and commissions and incidental costs incurred when buying and selling assets abroad. For funds registered in Luxembourg, the only costs not covered are brokerage fees and commissions charged by third-party banks and brokers, plus any applicable taxes or duties.
Annual report/semi-annual report		For each fund it manages, the management company publishes an audited annual report within four months of the close of the financial year and an unaudited semi-annual report within two months of the end of the first half of the financial year. The annual report contains e.g. the annual financial statements, the statement of changes in the fund’s net assets, the structure of the portfolio and the auditor’s report. The semi-annual report contains the most important half-year results.
Asset allocation		The strategic investment of the available assets in different asset classes, such as money market instruments, bonds, equities, real estate, etc. The portfolio is also broken down by sector and according to geographic and currency criteria.
Asset allocation funds		Investment funds which replicate the official investment strategies of the providers for the various risk classes. Asset allocation funds invest worldwide in various instruments, depending on the risk category equities or bonds are overweight. Also known as strategy funds, portfolio funds, investment objective funds, asset management funds or mixed funds.
Asset manager		See portfolio manager.
Asset value		The net assets of a fund divided by the number of units in circulation.
Auditors		An organisation independent of the fund management company and the custodian bank which regularly monitors compliance with the legal regulations. Auditors must be recognised by the supervisory authorities, which in Switzerland is the Federal Banking Commission.
	Bank declaration (Affidavit)		In the case of investment funds established under Swiss law, federal withholding tax amounting to 35% is in principle deducted from distributions of income (interest/dividends). Investors domiciled outside Switzerland receive the distributions without deduction of this tax, provided that at least 80% of the income distributed was generated outside Switzerland and that the investors can produce a bank declaration (affidavit) certifying that their units are deposited at a bank.
	Benchmark		An index which serves as the basis for measuring the performance of an investment fund. Also known as reference index.
	Beta		A measure of risk which indicates the sensitivity of an investment, such as an investment fund, to fluctuations in the market, as represented by the relevant benchmark. For example, a beta of 1.2 tells us that the value of an investment fund can be expected to change by 12% if the market is forecast to move by 10%. The relation is based on historical data and is only an approximation. However, the closer the correlation between the benchmark and the investment fund, the better this approximation.
	Blue chips		Term used to describe equities of leading companies with top-class credit ratings, high market capitalisation, strong earnings power and sound financial structure.
	Bond funds		Investment funds which invest in bonds and other fixed or variable interest securities. Bond funds generally have a specific reference and investment currency.
	Bonds		Debt instruments with a fixed coupon - at times also with a variable rate of interest - and generally with a fixed maturity and redemption date. The most common issuers are major companies, government bodies such as the federal government and the cantons, public institutions and international organisations such as the World Bank or the International Monetary Fund.
	Bonds in default		Bonds which do not make their interest payments or redemption on the scheduled due dates.
	Book profit /loss		The theoretical profit or loss on an investment due to its rise or fall in value, as long as the investment is not actually sold.
	Business year		See financial year.
	Call		In the case of bonds, the right of an issuer to redeem a bond before its scheduled maturity.
	Call options		See options.
	Capital preservation fund		An investment fund that enables investors to benefit from advances on the financial markets while providing a large measure of protection against losses exceeding a specified percentage. UBS offers two types of capital preservation funds - Limited Risk Funds and Dynamic Floor Funds.
	Capitalisation rate		The capitalisation rate is made up of the charges on a property (interest on fixed assets, duties, operating expenses, insurance premiums, maintenance and repair costs, building amortisation/depreciation, risk of rental losses, administrative costs) and is expressed as a percentage of the capitalised-income value. As one of the elements used in determining the capitalised-income value, the capitalisation rate is assessed by an independent expert based on expenses expected to arise in connection with the property.
	Capitalised-income value		Is determined according to the rental income of a property. Rental income must seem appropriate and obtainable over the long term in order to be fully included in the calculation. The capitalised-income value is the major factor used in appraising income properties.
	Cash flow		Cash flow represents the net income earned in a financial year before write-offs and provisions.
	Cash flow yield		Net income earned before write-offs and provisions in proportion to the current market price, less the accumulated earnings included in this price.
	Cash yield		See yield on distribution.
	Certificate		Collective security evidencing one or more investment fund units.
	Closed-end fund		An investment fund in the form of a company (normally a stock company) with fixed capital. A closed-end fund is not obliged to redeem issued units at the request of the unitholder. Units of this type of investment fund may not be sold publicly under Swiss law. As opposed to an open-end fund.
	Collective investment contract		The collective investment contract is the legal basis for the investment fund business in Switzerland. This agreement is concluded between the management company, the custodian bank and the investor. It is the legal basis for the management of the investment fund by the management company on the one hand and for the participation of the investors in the assets of the investment fund on the other. The collective investment contract is embodied by the fund regulations.
	Commission de Surveillance du Secteur Financier		The "Commission de Surveillance du Secteur Financier" (CSSF) is the state supervisory authority which monitors the investment fund business in Luxembourg.
	Commissions		Issuing commission and redemption commission. Fee charged on the subscription or redemption of fund units.
	Commodity fund		An investment fund which invests its assets primarily in tradable commodities.
	Contract form		An investment fund which has no legal personality. By purchasing units, the investor concludes a collective investment contract with the management company and the custodian bank. The unit holder does not have any rights of ownership to the fund assets, but rather a claim to participate in the assets and income of the fund. As opposed to a corporate form.
	Convertible bonds		Bonds which feature a conversion right entitling the holder to convert the bond into shares of the company in question at a certain point in time and at a conversion ratio set in advance. Following the conversion, the bond expires.
	Core Portfolio		The Core Portfolio is that part of the portfolio of a (dynamic) capital preservation fund that serves to ensure that the capital is preserved. Investments are generally in money market instruments and bonds in the fund’s reference currency.
	Corporate form		An investment fund which has its own legal personality, usually a joint-stock company. The units are issued in the form of equities. The investors are shareholders and have both proprietary and membership rights. The Swiss Investment Fund Act does not recognise funds set up in corporate form, but it is widely used in other parts of Europe and the United States. As opposed to the contract form.
	Correlation		A measure of the degree to which the price trends of various investment categories or instruments move in the same direction. The correlation quantifies the strength of the relationship as a figure between -1 and +1. The closer the coefficient is to 1, the stronger the correlation. If the coefficient is -1, the investments and the benchmark move in opposite directions. If the value is 0 there is no correlation.
	Cost averaging		Strategic exploitation of price fluctuations. This method of investing takes advantage of regular payments. The investor invests the same amount every month, and thus acquires more units when the issue price is lower and less units when it is higher. Over the long term, the investor thus attains a more favourable cost price than with the regular purchase of a fixed number of units over the same period of time.
	Country fund		An investment fund which invests primarily in equities of a specific country.
	Coupon		The interest or dividend certificate attached to a security. These certificates entitle their owners to receive the income on the respective due dates and also entitle them to exercise the rights evidenced by these certificates.
	Credit rating		Measurement of the quality of a borrower, particularly in respect of solvency and willingness to pay. The credit rating makes it possible to draw conclusions regarding the quality of bonds and the probability that interest payments will be made regularly and that the principal amount will be repaid at maturity.
	Credit risk		Risk of the issuer of a security becoming insolvent. See also credit rating.
	CSSF		See Commission de Surveillance du Secteur Financier.
	Currency of account		Currency in which the fund’s accounts are kept and in which the net asset value and the issue and redemption prices are calculated. Not to be confused with the investment currency or the reference currency.
	Custodian bank		The custodian bank is responsible for keeping the entire assets of the fund in its custody and for the issue and redemption of fund units. It ensures that the management company complies with the provisions of the Investment Fund Act and the provisions of the fund prospectus.
	Custody account administration fee		Fee charged annually for the safekeeping and administration of securities.
	Debtor risk		See credit risk.
	Delta-adjusted exposure		The delta-adjusted exposure to an underlying instrument (e.g. the SMI) is equal to the sum of the weighted deltas (see delta of an option) of all individual options which are held in the portfolio plus all equity investments. This figure indicates the extent to which the portfolio as a whole will participate in stock market movements. If, for instance, a portfolio has a delta-adjusted equity exposure of 30%, this means that the portfolio as a whole will change by 30% of any movement made by the equity market. If the stock market goes up by 2%, the value of the portfolio as a whole will rise by 0.6% (30%*0.2% = 0.6%). Like the delta, the delta-adjusted exposure only remains constant when there are very small movements in the underlying instrument and is in any case only indicative since its value is largely dependent on the underlying and the option’s term to maturity.
	Delta of an option		The delta of an option is a measure of sensitivity which indicates the extent to which an option participates in the movement of the underlying instrument (e.g. the SMI). If an option on a Swiss equity has a delta of 0.4 (or 40%), it gains CHF 0.40 for each Swiss franc that the share price rises and loses CHF 0.40 for each Swiss franc that the share price falls. The delta of an option only remains constant when there are very small movements in the underlying instrument and can in any case only be indicative as its value is largely dependent on the underlying and the option’s term to maturity.
	Derivatives		Financial instruments, such as options or futures, which are derived from underlying instruments, frequently equities or foreign exchange. In portfolio management, derivatives can be used to reduce the risk of capital losses.
	Direct yield		Distribution per unit as a percentage of the market price.
	Discount		For real estate funds, the difference between the market price and the (higher) net asset value of a unit expressed as a percentage. As opposed to premium.
	Distribution		The annual distribution of income generated by the fund to the unit holders. See also reinvestment.
	Distribution fund		An investment fund which distributes the income generated to its unit holders. As opposed to a reinvestment fund.
	Diversification		Distribution or spreading of investments across a number of different individual securities, sectors, countries and currencies. In modern portfolio theory, diversification or risk distribution is regarded as a crucial factor in the reduction of risk: By spreading investments across a variety of securities, the risk is also spread, so that the overall risk of a portfolio is significantly lower than that of the individual securities. A broad diversification with dozens or hundreds of individual securities is only possible with substantial assets or with investment funds.
	Dividends		The share of a company’s net profit distributed on equities, participation certificates, cooperative shares or dividend-right certificates.
	Domestic bonds		Bonds issued by domestic borrowers in their own currency on their home market.
	Double taxation agreement (DTA)		International treaties which Switzerland has concluded with other countries to ease or prevent double taxation. Double taxation occurs when a taxpayer is taxed for the same taxable object or tax process by two different governments. A DTA may make it possible for the withholding tax deducted in Switzerland to be reclaimed, in whole or in part, by foreign investors (investors who are not tax residents in Switzerland) on their tax returns.
	Duration		The duration represents the length of time for which capital is "tied-up" in a bond investment. In contrast to residual maturity calculations, the concept of duration takes account of the time structure of returning cash flows (such as coupon repayments). The average duration of the portfolio is derived from the weighted average duration of the individual securities. The "modified duration" is derived from the duration and provides a measure of the risk with which the sensitivity of bonds or bond portfolios to interest-rate changes can be estimated. A 1% increase (decrease) in the interest level accordingly produces a percentage fall (rise) in the price in proportion to the modified duration. For example: the modified duration of a bond fund is 4.5 years, the theoretical yield to maturity is 5.3%. If the yield drops by 1% to 4.3%, the fund price increases by around 4.5%. For bond and asset allocation funds, the duration is given for all fixed-income instruments.
	Dynamic floor fund		See capital preservation fund.
	Eco-innovator		A company whose products and services help to achieve a specific benefit with the greatest possible resource efficiency. Examples: a supplier of organic food or regenerative energies such as wind and solar power.
	Eco-leader		Leading company with the best record of environmental achievement in its industry. Using a detailed analytical process, UBS identifies the leaders in each sector of the economy.
	Emerging market bonds		Bonds from Latin America, Eastern Europe and Asia that offer high potential yields but entail a higher risk exposure due to the political or economic uncertainty in these countries.
	Emerging markets		Emerging markets or developing markets - mainly in Asia, Eastern Europe and Latin America - that are growing quickly, but whose economies and stock markets have not yet reached Western standards.
	Emerging markets fund		An investment fund which invests in emerging markets, such as Asia or Latin America. See also emerging markets.
	Encumbrance		The expenditure of a property for interest on investment capital, duties, real estate operating costs, insurance premiums, maintenance and repair costs, building amortisation/depreciation, risk of rental losses and administrative costs. Various properties may differ sharply from each other in terms of encumbrance, among other reasons due to the age structure and the related maintenance and repair costs, the type of building (residential or office building) and the tax burden on the location of the property.
	Environmental efficiency		The key indicators for environmental efficiency are energy and resource consumption. Environmentally efficient management brings environmental benefits and, thanks to the savings it achieves, economic benefits.
	Environmental funds		Investment funds that employ environmental criteria in their decisions.
	Equities		Securities which evidence an equity interest in a company. As a joint owner, the shareholder has rights of participation (voting right, right to information) and rights to assets (right to a share of profits, subscription rights).
	Equity funds		Investment funds which invest their assets primarily in equities. The main categories are country and regional funds, emerging market funds, small and mid cap funds, sector and theme funds, index funds.
	Eurobonds		Bonds issued on the Euromarket which are exempt from withholding tax. Eurobond trading is centered in London for tax reasons. See also foreign bonds.
	Euromarket		Term used to refer to money markets and capital markets where currencies and securities are traded outside their respective country of origin.
	Exchange-rate risk		Risk of price fluctuations between the currency of account and the investor’s reference currency.
	External costs		External costs are the negative effects that the production or consumption of goods can have on third parties without any commensurate compensation being paid.
	Factor 4		Demonstrates the benefits of the environmental efficiency principle. Double the prosperity using only half the resources.
	FCP		See fonds commun de placement.
	Federal Banking Commission (FBC)		The supervisory authority and executive body elected by the Federal Council, independent of the Federal Administration and Swiss National Bank, and responsible for the implementation of the Banking Law and the Investment Fund Act. The FBC authorises management companies, custodian banks, representatives and sales agents to commence business activities. The FBC is also responsible for authorising new funds and approves their fund regulations. It monitors compliance with the Investment Fund Act and the fund regulations. In cases of gross misconduct, the FBC can withdraw a management company’s or custodian bank’s licence to conduct business.
	Fiduciary responsibility		The duty imposed by law on the management company and custodian bank as well as on their representatives to act solely in the interests of their investors.
	Financial year		Period between one year-end closing and the next. A fund’s financial year need not necessarily coincide with the calendar year. Also known as business year.
	Fixed-income securities		Together with money market instruments, bonds are referred to as fixed-income securities because they make regular, fixed-interest payments and repay the principal amount in full at maturity.
	Flat fee		With real estate funds, commission paid to the fund management to cover its expenses such as management of the fund assets and real estate, the custodian bank's monitoring charges, the costs for safekeeping of securities and mortgage certificates, the exercising of payments, coupon payment commissions, fees for appraisal experts and auditors, etc.
	Floating rate notes		Securities with variable interest rates.
	Floor		Lower limit below which the invested capital may not fall on a set date.
	Floor funds		See capital preservation funds.
	Fonds commun de placement		French term for investment funds established in contract form.
	Foreign bonds		Bonds issued by a borrower outside its home country and denominated in the currency of the market where the issue is made. See also Eurobonds.
	Forward pricing		Under this system, the fund assets are valued on the basis of the previous day’s closing prices. As opposed to historic pricing.
	Fraction		In the investment fund business, a fraction of a fund unit.
	Fund assets		See net fund assets.
	Fund domicile		A fund is domiciled in the country in which the fund is established or registered with the local supervisory authority.
	Fund-linked life insurance		In the case of fund-linked life insurance, the portion of insurance contributions which are normally invested in the unearned premium reserve (savings portion) is used to acquire fund units. There are life insurance policies which allow the policyholder to choose from a range of funds, as well as policies which allow the policyholder to simply select an investment focus (bonds, equities, real estate, etc.).
	Fund manager		See portfolio manager.
	Fund of funds		An investment fund which restricts its investments to units of other investment funds. Not to be confused with an umbrella fund.
	Fund regulations		See prospectus.
	Futures		In the case of futures, the contracting party is obliged to buy or sell a standardised amount of an underlying instrument at an agreed price on a stipulated future date. See also derivatives, options.
	Government bonds		Bonds issued by governments to finance their national budgets.
	Gross yield		With real estate funds, rental income as a percentage of market value.
	Hedge funds		Despite the name, hedging transactions are not the primary purpose of such funds. Since these funds are aimed at generating absolute income, they make investments which conventional funds are not allowed to make (speculation on market declines, short sales, use of derivatives, financing investments by borrowing). This enables hedge funds to record positive returns irrespective of the market situation.
	Hedging		Protecting investments against losses. UBS asset allocation funds specifically hedge against exchange-rate risks.
	Hedging costs		These are costs that arise when a portfolio is hedged against losses using dynamic or static hedging. For portfolios with dynamic hedging the expenses primarily consist of purchase and redemption costs for shifting investments between the Core Portfolio and the Opportunity Portfolio. For static hedging the costs arise from the purchase of derivatives such as put options.
	High watermark		The high watermark is used in connection with the performance fee. The fund manager calculates his or her share of the profits on the basis of the value increment over and above the last peak in the NAV. As a result, the performance fee does not become payable until all losses incurred have been completely recovered.
	High-yield funds		Bond funds which invest in bonds issued by borrowers with lower credit ratings. Such bonds offer higher rates of interest, but at the same time there is also a higher risk of default, i.e. that interest payments will not be paid or that the face value will not be repaid.
	Historic pricing		Settlement method in the investment fund business. The investor knows the net asset value of the fund at the time of subscription/redemption. As opposed to forward pricing.
	IFA		See Investment Fund Act.
	IFO		See Investment Fund Ordinance.
	IFO-FBC		See Ordinance of the Federal Banking Commission on Investment Funds.
	Income		Interest and dividends.
	Income Distribution		The annual distribution of the income generated by the fund of the unit holders. See also reinvestment.
	Income property		Property which is built or bought not for the owner’s use but as a capital investment.
	Index		Indicator of performance on one or more markets. The oldest and best-known stock market index is the Dow Jones. Indexes make it possible to compare the performance of a fund which is invested in a specific market with the development of this market. See also benchmark.
	Index fund		An investment fund which replicates a chosen stock market index in its stock selection and weightings as exactly as possible.
	Inhouse fund		Funds created by banks for the purpose of collectively managing the assets of existing clients without public solicitation. The fund is managed separately for the account of the investors according to a set of regulations. As opposed to an investment fund.
	Interest withholding tax (Zinsabschlagssteuer)		Since interest withholding tax was introduced on 1 January 1993, the custodian banks in Germany are generally obliged to deduct 30 percent of the interest revenue contained in the distribution (dividends are subject to capital gains tax), to retain this as a pre-tax deduction and to forward it to the Finance Department. Interest withholding is a type of collection tax which may be partly or wholly reclaimed by taxpayers by declaring it in their income tax assessments. For taxpayers acting as custodians of their own securities (in particular this affects investors who acquired their fund units on an over-the-counter basis), the deduction on the paid-out revenue is 35%. An exception here are reinvestment funds, which are subject to 30% interest withholding tax in all cases (for securities held by a custodian or by the owner of the securities).
	Interim profit taxation (Zwischengewinnbesteuerung)		German finance authorities observed that many investors regularly sold their fund units prior to the year-end of the fund, in order to avoid taxation of earnings (considered a tax-free capital gain). German lawmakers therefore introduced the so-called interim gains tax on 1 January 1994. With each sale or redemption of units of foreign funds, the interest accrued until that date is taxed (does not apply to dividends). The sale or redemption of units before the end of the fund’s financial year thus no longer allows investors to make tax-free gains.
	Intrinsic value		See net asset value.
	Investment currency		Currency in which an investment fund makes its investments. Not to be confused with reference currency or currency of account.
	Investment funds		Investment funds are assets solicited through public advertising, pooled by a great number of independent investors for the purpose of collective investment and managed by the fund management for the account of investors and in accordance with the principles of risk diversification.
	Investment Fund Act		In Switzerland relationships between investors, management company and custodian bank are governed by the Investment Fund Act (IFA) and the related ordinances issued by the Federal Council and the Swiss supervisory authority (Federal Banking Commission, FBC).
	Investment Fund Ordinance		Investment Fund Ordinance (IFO) issued by the Federal Council on 19 October 1994, which contains detailed provisions regarding the Investment Fund Act.
	Investment horizon		The period of time for which investors want to commit a part of their assets.
	Investment instruments		The various investment categories such as equities, bonds and money market instruments.
	Investment policy		The investment policy describes the approach taken to achieve the investment objective (stock selection, timing, cash holdings, etc.).
	Investment principles		The investment principles characterise and define the fund. The investor receives information about the securities held in the portfolio, the investment currency, the geographic mix of the investments and the risk diversification of the investment fund.
	Investor		By purchasing units, the investor acquires the right to participate proportionately in the assets and earnings of the fund.
	ISIN number		International Securities Identification Number. Internationally recognised securities number. Equivalent in Switzerland to a securities number.
	Issue		Issue of new securities.
	Issue price		Price at which investors can subscribe fund units. It corresponds to the net asset value per unit plus the issuing commission.
	Issuer		Legal entity or public entity which issues securities in order to raise borrowed capital.
	Issuing commission		The commission charged to the investor by the issuing fund management company on the subscription of units.
	Junk bond fund		See high-yield funds.
	Large caps		Companies with very large stock market capitalisation in relation to the market on which they are traded.
	Leverage		With derivative instruments, greater returns can be earned with a comparatively low capital investment than with an investment in the actual underlying instrument. This effect is called leverage.
	Liquidity		Units of investment funds enable the unit holders to remain liquid, i.e. they can redeem their units as a rule at any time. The management company is obliged to redeem the units at the current redemption price without any notice of termination.
	Listing		The admission of a security to official trading on a stock exchange, which is usually subject to the fulfilment of certain criteria. UBS’s real estate funds are listed on the Swiss Exchange. The issue and redemption of units of the other investment funds are conducted either over the counter or directly via the fund.
	Long-term funds		An investment fund which invests in bonds with a (term to) maturity of at least 5 years.
	Luxembourg-based funds		An investment fund established under Luxembourg law and managed by a management company domiciled in Luxembourg.
	Management company	In Switzerland a joint-stock company which manages investment funds for the account of the investors, independently and in its own name. It decides on the issue of units and on investments, determines the issue and redemption prices as well as the distribution of income and exercises all rights associated with the investment fund. It may delegate investment decisions and other partial duties, but is liable for actions of its agents as if they were its own actions.
	Management fee	The charge levied by the management company for the administration of an investment fund. The amount of the fee is expressed in percentage or tenth of a percentage of the fund assets or in basis points. Less comprehensive than UBS’s all-in fee and covers only part of the costs due.
	Management style	Manner in which the investment decisions are made to achieve the investment objective.
	Market capitalisation	The market value of a listed company, corresponding to the current market price of its shares multiplied by the number of all the equity securities in circulation. Also called stock market capitalisation.
	Market risk	Risk that depends on factors which influence the whole market and which cannot be reduced or excluded by diversifying the portfolio.
	Market value	For real estate funds, the current value of a property as assessed by independent experts. Corresponds to the price for which a property could realistically be sold. For UBS real estate funds, the market value of the real estate is normally calculated once a year.
	Maturity	Period of time from the issue of a bond to its due date or to the premature repayment of the bond. Not to be confused with duration. See also term to maturity.
	Medium-term fund	At UBS, investment funds which invest in bonds with a (term to) maturity of 3 - 5 years.
	Medium-term notes	Fixed-income investment instruments issued by banks, with maturities between two and eight years. Bond funds cannot invest in medium-term notes as they are not permitted for official stock exchange trading.
	Mid caps	Companies with medium-sized market capitalisation. Also called secondary stocks.
	Money market funds	Investment funds which invest in short-term fixed-interest paper (less than a year to maturity) in specific currencies.
	Money market instruments	Securities with maturities of no more than one year which are traded on the money market. The classic money market instruments in Switzerland are domestic bills of exchange, treasury bills and treasury notes. Key foreign investments include commercial paper and certificates of deposit.
	Net asset value	The net asset value of a unit is equal to the net fund assets divided by the number of units in circulation. In the case of securities and money market funds, the net asset value, which is generally calculated daily, is the basis for calculating the issue price and the redemption price. Also called intrinsic value.
	Net fund assets	The value of a fund’s assets calculated at market prices after the deduction of any liabilities. For real estate funds the expected liquidation taxes are also deducted, as are mortgages and other debts.
	No-load fund	An investment fund which does not charge any commission on the subscription or redemption of units.
	Notes	Securities privately placed (i.e. without public advertisement) on the Swiss capital market by foreign borrowers.
	Offshore fund	An investment fund with its legal domicile in a country which offers tax exemption or tax breaks (such as the Bahamas, Bermuda). In Switzerland only offshore funds from countries which have comparable fund supervision to Switzerland’s are allowed to be sold publicly.
	Open-end fund	An investment fund with variable capital which can continually issue new units but which must also redeem the units issued upon request at their net asset value. Swiss investment funds are open-end funds.
	Opportunity Portfolio	The Opportunity Portfolio is that part of the portfolio of a (dynamic) capital preservation fund that invests in international financial markets with the aim of participating in the movements on these markets. Investments are usually made in foreign-currency bonds and in equities.
	Options	The buyer of an option acquires the right - but not the obligation - to buy (call option) or sell (put option) a specified amount of a certain underlying instrument at a predetermined price on or by a specified future date. The buyer pays the seller of the option a premium (option price) for this right.
	Ordinance of the Federal Banking Commission on Investment Funds	Investment Fund Ordinance issued by the Federal Banking Commission (IFO-FBC) on 27 October 1994, which contains detailed provisions regarding the Investment Fund Act.
	Other funds	Investment funds which are neither securities funds nor real estate funds. They may contain investments which have limited marketability, are subject to greater price swings, have a limited diversification of risk or which are difficult to value (e.g. investments in precious metals, commodities, options, forward contracts, units of other investment funds and other rights).
	Other funds with special risks	Investment funds which, unlike funds in the other funds category, have a special risk which is not comparable to the risk of securities funds. There must be explicit reference to this fact in the fund name, the prospectus and in advertisements. The units of such funds may only be sold on the basis of a written agreement in which the special risk is stated.
	Paying agent		The agent or bank which is explicitly appointed by the issuer and which is responsible for all ongoing transactions that arise for the owner of the securities concerned, such as the collection of dividends and coupons as they fall due.
	Payout ratio		With real estate funds, the ratio between cash flow and the distributed earnings. The ratio indicates how much of the money earned in a financial year is actually paid out.
	Performance		Percentage change in the value of an investment, plus any accumulated income, and corrected for inflows and outflows of funds during a defined period of time. Meaningful investment fund performance comparisons are only possible over longer periods of time, e.g. over three, five or ten years.
	Performance fee		For non-classical investment funds such as hedge funds, the investor has to pay, in addition to the conventional management fee, a supplementary performance fee in the form of a percentage (e.g. 20%) of the fund’s annual increase in value. A high watermark is usually set for this amount.
	Perpetual bonds		Bonds with no maturity date. Perpetual bonds make regular interest payments, but never redeem the principal amount; to get back the capital invested in such bonds, investors must sell them on an exchange.
	Portfolio		In the investment fund business, the composition of a fund’s assets.
	Portfolio managers		Investment specialists who manage the assets of an investment fund. They decide which securities to buy and sell within the defined investment principles. Also called asset managers.
	Portfolio theory		Portfolio theory provides the theory of financial markets that describes the relationship between risk and return. The best-known theory was formulated by Nobel Prize winner Harry M. Markowitz.
	Premium		1. A figure, usually expressed as a percentage, to indicate, for example, how high the issue price of a security lies over a specific reference price, usually the nominal value. 2. A premium can also mean the amount (often also expressed as a percentage) a buyer is willing to pay for a right (option price, option, subscription right) above the book value. 3. For derivative instruments used for hedging purposes (put options), it is the price that the option buyer pays for the right to sell the underlying security. In the case of the put options used for the Limited Risk Funds, the premium rises as market volatility increases.
	Premium		For real estate funds, the difference between the market price and the (lower) net asset value of units, expressed as a percentage.
	Price differential		See premium.
	Prospectus/ fund regulations		The rights and obligations of the contracting parties are defined in the prospectus and fund regulations. In particular, these documents contain guidelines governing investment policy, the use of earnings and the costs the fund and/or the investor have to bear.
	Put options		See options.
	Rating	The measurement of the creditworthiness of a borrower by special rating agencies, such as Standard & Poor´s or Moody’s. As a rule, UBS money market and bond funds restrict their investments to securities with top ratings (AAA or AA).
	Real estate fund	Assets solicited through public advertising, pooled by a great number of large and small investors for the purpose of collective investment in real estate. UBS real estate funds invest their money entirely in income properties in Switzerland.
	Real value	Post facto calculation of the actual asset value of a property, i.e. the cost of reconstructing a building of the same standard, taking into account the depreciation due to age that has occurred in the meantime and the value of the land.
	Redemption	Units of most UBS securities and money market funds are redeemed on the basis of the net asset value per unit without deduction of a redemption commission.
	Redemption commission	A commission charged by the management company to the investor upon redemption of units.
	Redemption deadline	Units of real estate funds can be traded on the stock exchange or presented to the management company for redemption at the end of the financial year, subject to a 12-month notice period. Payment will follow two months after the close of the corresponding financial year.
	Redemption plan	Speciality of the UBS Investment Fund Account: Once the investor’s account has reached CHF/DEM/EUR/USD 100,000, he or she can regularly withdraw an amount. The investors determine the amount (by either receiving the gains the account generates or directly drawing down assets) they would like to have transferred, to which account, and on which dates.
	Redemption price	The price at which an investment fund is obliged to redeem units, which is charged to the fund assets. With real estate funds, price at which the management company is obligated to buy back units, subject to the statutory period of notice prescribed by law. The redemption price corresponds to the net asset value less any redemption commission.
	Reference currency	Currency in which an investor normally thinks, calculates and fulfils his or her liabilities. It is also the currency in which the performance of an investment is measured.
	Reference index	See benchmark.
	Regional fund	An investment fund which invests in a specific geographic region (e.g. Scandinavia) or a particular economic area (e.g. Euroland).
	Reinvestment, continuous	The continuous reinvestment of the income generated by a fund in the same fund.
	Reinvestment	The possibility of reinvesting the distribution in the same fund. Certain funds offer investors a special reinvestment discount on the issuing price if the annual distribution is reinvested. This is true of most Swiss-registered funds.
	Reinvestment discount	See reinvestment.
	Reinvestment fund	An investment fund that continuously reinvests its income in the fund rather than distributing it to unit holders, as opposed to distribution fund. See also tranche.
	Representative	In the case of investment funds established under foreign law that can be sold publicly in Switzerland, the representative is the individual or legal entity domiciled in Switzerland that represents the fund vis-à-vis investors and the supervisory authority in Switzerland. Representatives require prior authorisation from the Federal Banking Commission. See UBS Fund Management (Switzerland) AG.
	Resource efficiency	Resource-efficient production uses fewer and/or more environmentally friendly resources. This helps protects the environment and offers financial savings.
	Return	See performance.
	Risk	In portfolio theory the risk of an investment is measured by the amount of volatility. Risk and return are directly related: Markowitz’s portfolio theory posits that a higher return can only be obtained with a higher risk.
	Risk capacity	An investor’s capacity to incur a defined investment risk without getting into financial difficulties in the event of – realised – losses.
	Risk tolerance	The degree of possible price fluctuations that an investor is willing to accept in order to attain a specific investment goal. Risk tolerance and an investor´s need for security are important factors when selecting an investment fund. The higher the risk tolerance, the greater the component of equities and foreign currencies.
	Sales agent	Partner of a fund provider who sells the provider’s products to clients and redeems the products from clients.
	Savings plan	Speciality of the UBS Investment Fund Account: This form of investment involves the regular payment of a specified amount to accumulate fund assets. See also cost averaging.
	Sector average	The sector average is the unweighted average performance of all funds in the same investment category. Generally all funds of the same investment category which are authorized for sale in one country are considered together.
	Sector fund	An investment fund which invests its assets solely in securities of companies in a specific sector of the economy.
	Securities fund	An investment fund that invests in securities and loan-stock rights that are traded on a stock exchange or on another regulated market open to the public. See also real estate funds and other funds.
	Securities lending	The lending of securities against remuneration and on provision of collateral. Since 1992, securities lending has also been permitted for investment funds.
	Securities number	Identification number of securities used in Switzerland to facilitate their trading and transfer. International equivalent ISIN number.
	Securities purchase charge	There are certain funds which, owing to their special structure, may charge so-called securities purchase fees in addition to the issuing commission. This commission accrues to the fund and is used to cover the costs arising in the acquisition of securities. The fee is charged for capital preservation funds.
	Securities turnover tax	See stamp duty.
	Security risk	Risk of fluctuations in the price of a security.
	Segment	See subfunds.
	Semi-annual report	See annual report.
	SFA	See Swiss Funds Association.
	Sharpe Ratio	The Sharpe Ratio is defined as the expected excess return per unit of risk. The higher the Sharpe Ratio the better the portfolio for an investor.
	Short-term fund	A fund which invests in bonds with a (term to) maturity of 1 to 3 years.
	SICAF	Société d’investissement à capital fixe. An investment fund in the form of a joint-stock company with fixed capital. See corporation form.
	SICAV	Société d’investissement à capital variable. An investment fund in the form of a joint-stock company with variable capital. The fund’s units are issued in the form of equities. See corporation form.
	Small caps	Shares of companies with a market capitalisation of generally less than CHF 500 million. Also called secondary stocks.
	Small/mid cap funds	Funds which invest in shares of companies with relatively small market capitalisation. See also small caps and mid caps.
	Speciality fund	A fund which differs from conventional investment funds in that it adopts a special investment approach or focuses specifically on certain countries, industries or investment instruments.
	Stamp duty	Subscriptions to investment funds domiciled abroad are subject to stamp duty in Switzerland. Redemptions are exempt from stamp duty. The issue and redemption of units of Swiss-based investment funds are not subject to stamp duty.
	Stock exchange price	The price of units of investment funds which are listed on the stock exchange or traded over the counter (real estate funds). The price is governed by supply and demand in the market, whereas the issue and redemption prices of the units are determined by the management company on the basis of the net asset value.
	Stock market capitalisation	See market capitalisation.
	Straight bonds	Bonds with a fixed coupon and fixed redemption date.
	Strategy funds	See asset allocation funds.
	Subfund	Part of an umbrella fund. For investment funds with different subfunds, investors are only entitled to the assets and income of the subfund in which they hold units. Subfunds are also called compartments or segments.
	Subscription	In the fund business, subscription means the acquisition of fund units. As opposed to redemption.
	Supervisory authority	The state body which supervises the activities of management companies. In Switzerland the Federal Banking Commission (FBC) acts as the supervisory authority for the investment fund business. In Luxembourg it is the "Commission de Surveillance du Secteur Financier (CSSF)", in Germany the Federal Banking Supervisory Office (BAKred), in Austria the Federal Ministry of Finance (Bundesministerium für Finanzen) and in Liechtenstein the Office for Financial Services (Amt für Finanzdienstleistungen).
	Sustainable development	Development which meets the needs of the present without compromising the ability of future generations to meet their own needs. (Report of the Brundtland Commission 1987).
	Swiss Fund Association	Association which represents the interests of the investment fund industry in Switzerland. It was established in Basel in 1992 under the auspices of the Swiss Bankers Association.
	Tax at source	Tax levied directly at source, for example withholding tax in Switzerland.
	Term to maturity	Remaining life of a bond from the current date to the final due date or the premature repayment of the bond. Not to be confused with duration.
	Termination	In the investment fund business, withdrawal of an investor from the collective investment contract. The redemption price is in principle to be paid immediately. Special regulations apply to real estate funds, see redemption deadline.
	Theme fund	An investment fund which invests in securities which meet a specific criterion (environmentally friendly, ethical commitment, etc.) or which all have the same characteristic (e.g. companies which are undergoing restructuring programmes).
	Theoretical yield to maturity (gross) for asset allocation funds	In contrast to bond funds and money market funds, the theoretical yield to maturity in this case is reported as a gross figure to allow meaningful comparisons, as the asset allocation funds can vary considerably with regard to weighting of their interest-bearing investments as well as to their fee structure.
	Theoretical yield to maturity (net) for bond and money market funds	The theoretical yield-to-maturity figures published for our bond funds and money market funds represent the yield expected for the next 12 months based on the current fund portfolio. This yield is an estimate and corresponds to the weighted average yield to maturity on all the fund’s investments. In the process, the fund’s own administrative costs are calculated and subtracted from the gross yield to maturity. The theoretical yield to maturity is also affected by changes in the composition of the portfolio and fluctuations in interest rates. In other words, no conclusions can be drawn from a fund’s yield to maturity concerning a possible distribution.
	Total risk	See risk.
	Tracking error	Measure of the deviation of the return of a fund compared to the return of a benchmark over a fixed period of time. Expressed as a percentage. The more passively the investment fund is managed, the smaller the tracking error.
	Tranche	Most Luxembourg-based bond and asset allocation funds offer investors two different tranches: Tranche A: annual distribution of income. Tranche B: continuous reinvestment of income.
	UBS Fund Management (Switzerland) AG	This company serves as the management company of all UBS Investment Funds established under Swiss law and also acts as the representative of all UBS foreign-based funds in Switzerland vis-à-vis the investors and the supervisory authority. The management company is domiciled in Basel.
	Umbrella fund	An investment fund which comprises several subfunds. Together the subfunds form one single legal entity, meaning that only the umbrella fund needs to be submitted for authorisation. The subfunds are governed by the same fund regulations and prospectus. Once the umbrella fund has been approved, other subfunds can be created. All UBS Investment Funds domiciled in Luxembourg are umbrella constructions. Not to be confused with fund of funds.
	Underlying instrument	A financial instrument (security, currency, index, commodity, etc.), which forms the basis for an option or future.
	Unit	A unit is a security which evidences the investor’s right to participate in the assets and income of the fund in proportion to the units acquired.
	Unit certificate	Physical certificate which evidences a unit of an investment fund. In general, however, units exist as a book entries only.
	Value of land	Value of a piece of land in relation to the economic possibilities for use. The value of land depends on location and geological properties as well as on the legal and technical possibilities for building on it.
	Variable-interest bonds	Bonds whose coupons change every quarter or every six months in line with the development of the respective reference interest rates. A commonly used reference interest rate is the Libor (London Interbank Offered Rate).
	Volatility	See risk.
	Warrant bonds		Bonds with a warrant attached. The warrant entitles the holder to buy a specific number of shares of the company in question during the exercise period at a price fixed in advance. Once the warrant is exercised, the bond continues to run until its maturity date.
	Withholding tax		In the case of Switzerland, a 35% federal tax on domestic capital income levied on the distributions of income made by Swiss investment funds. These deductions can be wholly or partly reclaimed depending on the source of the income and the domicile of the investor.
	Yield curve		The yield curve represents the relationship between the maturities of bonds traded on the market and their yield to maturity. The yield curve is basically divided into three segments: a short end, a long end and a middle segment (for UBS bond funds, this corresponds to maturities of 1 to 3 years for Short-Term Bond Funds, over 5 years for Bond Funds and 3 to 5 years for Medium-Term Bond Funds). The shape of this curve allows conclusions to be drawn regarding the current state of the bond market. Normally, the curve rises for longer maturities: the investor enjoys higher returns as a result of investing his money over the longer term. If the yields in the shorter-dated segment are higher than at the long end, this is called an inverse yield curve. The fund manager controls the interest-rate risk of the fund according to the positioning of his portfolio on the yield curve. See duration.
	Yield on distribution		The ratio of the income distributed to the current market price, minus the accumulated earnings this price includes since the close of the reporting year.
	Zero-coupon bonds		Bonds that make no interest payments. Instead of interest payments, the buyer of a zero-coupon bond purchases the security at a discount. Redemption is made at 100%.